Wednesday, October 12, 2022

Patagonia: Life Imitates Theory

 When Yvon Chouinard, the founder of Patagonia, completed the transfer of that company’s ownership to an environmental trust fund, it was front-page news across the country.  It came as something less than a shock to me, however, because I had described a very similar structure in a paper I wrote a few years ago about “pluralist social ownership”.

First, it’s interesting what Chouinard decided not to do.  He didn’t donate the company to a government agency, although that option is not quite as weird as it sounds.  Environmentally conscious landowners often donate parcels to park administrations or other government units, expressing their faith in the ability of the public sector to safeguard this type of resource and make it available for study and recreation.  If you don’t see the same sort of donations of companies like Patagonia, it’s because the track record of government in most other functions is much less impressive.

Chouinard also chose not to give Patagonia to its workforce.  This deserves a bit more attention, since many entrepreneurs have taken this course; some of the largest worker-owned firms were begun as normal, for-profit enterprises until the decision was made to put the workers in charge.  It’s a reasonable choice if the main motive of the private owner looking to divest is to benefit the workforce, but there is no reason why this has to be the dominant one, even for very socially conscious owners.  Chouinard is an example: he has earned a reputation for treating his employees very well, but his primary interest is environmental.

So instead he gave away the company to two environmental entities, one that holds all the voting shares (about 2% of equity) and another that will profit from the remainder.  This is perfectly reasonable, so long as these groups can be entrusted to adhere to this commitment.

Of course, if he had some other motive he could still have used the same general approach, but partnering with different organizations that shared his priorities.  If he were interested above all in gender equity he could have donated to gender equity trusts.  If the most important thing for him was to safeguard an indigenous culture, that type of trust could be endowed.  Or protecting the interest of a particular region, or promoting international cooperation, or, well, you name it.  Transferring ownership to a trust with a steadfast mission is an extremely adaptable approach, one that can accommodate a wide range of political and social values.

This is why I described what I called a “social equity fund” model in my paper.  The problem I was addressing was the form social ownership could take in a truly pluralist society, one with a mosaic of values and interests and not just one, however democratic the process for selecting it.  (I had reasons to doubt that a framework based on a monolithic conception of social interest would be compatible with democracy, but that’s a topic for another day.)  Investing ownership in a range of funds representing distinct groups and their values seemed to be the right approach.  Unlike state or even worker ownership, social funds could embrace a range of commitments as diverse as those found in society—truly a pluralist vision of social ownership.

The biggest problem with the Patagonia example, however, is that it was the work of a single individual, the firm’s founder and leader.  Chouinard is an exceptionally enlightened capitalist, but we can hardly count on the tender mercies of his peers.  This is why the indispensable step forward is to democratize the ownership shares of funds reflecting significant social interests.  This is the “socialist” part of the vision, in which most equity is progressively transferred from a minority of wealthy individuals to the funding system as a whole, and a mechanism for periodically allocating ownership to funds on a one-person, one-vote basis is established.

The paper discusses all this in some detail, including the regulatory framework such a system would require.

I hope Chouinard’s inventive solution to the problem of dedicating Patagonia to environmental values is recognized beyond environmentalist circles.  This points the way to a basic rethinking of how an economy can be owned and organized to advance social interests in a world in which such interests will inevitably be diverse and even sometimes in friction with one another.


run75441 said...


Thanks for the follow-up on Patagonia. Will definitely do so with your commentary at AB in a couple of days. And you put a link out to your paper. Not much more I could ask for Peter. A definite read also.

Sixty-five here this morning. Minnie the GS and I got our hour out in the desert before it gets too warm. She loves the smells and I need to walk. Such grateful critters. Had Elkhounds up north till we rescued Minnie.

Thank you again for adding to this topic.


Peter Dorman said...

Thanks! Unfortunately, 65 here in PDX refers to the AQI, which is where it is at the moment. It was a lot worse last week and may get worse again. Climate change has a partial hand in this, with scattered wildfires and an unseasonable blanket of stagnant, warm air.

Regarding Patagonia, the one additional point I wish I had made is that it can serve somewhat as a small pilot. Over time we can learn more about what regulatory and other practical matters need to be addressed in order for this ownership form to fulfill its promise.

run75441 said...


Pilot production is not that hard to do. It is typically rudimentary in the beginning till the process is established. I used to do this (planning) with kidney dialyzers (CF) and other products till we knew how to produce.

Not quite a lost art yet. Many of us are fading away. Stuck close to the suppliers and the engineers.

Patagonia has a large cadre of product. It may call for different product lines independent of each other. Even for distribution or purchasing, the product requirements differ.

It would be interesting to watch it work and get in there an write about it.

Peter Dorman said...

Your point is well taken. There should really be an ongoing observation of the new Patagonia structure undertaken by careful researchers. If anyone out there knows Chouinard, maybe he would fund something like this (if he has enough money left). It would be interesting to speculate on what a feasible, informative research plan might look like.